891 F.

2d 1445

Thomas A. MOORE and Edward J. Moore, Jr.,

Plaintiffs-Appellants/Cross-Appellees,
v.
SUBARU OF AMERICA, a New Jersey corporation; Randall
S.
Loftis, doing business as Ran's Subaru,
Defendants-Appellees/Cross-Appellants.
Nos. 88-1314, 88-1327 and 88-1364.

United States Court of Appeals, Tenth Circuit.

Dec. 14, 1989.

Garvin A. Isaacs (Thomas A. Wallace, and Glen D. Huff and David A.

Branscum of Foliart, Huff, Ottaway & Caldwell, Oklahoma City, with
him on the briefs), for plaintiffs-appellants/cross-appellees.
Bert M. Jones and William D. Perrine of Rhodes, Hieronymus, Jones,
Tucker and Gable, Tulsa, for defendants-appellees/cross-appellants.
Before McKAY, McWILLIAMS, and BRORBY, Circuit Judges.
McKAY, Circuit Judge.

This is an appeal from a jury verdict and set-off of prior settlement.

I. Facts
2

Plaintiffs were injured in an automobile accident on August 17, 1982, in

Shawnee, Oklahoma. They were rear seat passengers in a 1982 Subaru station
wagon when the owner-driver suffered an epileptic seizure and crashed into a
brick building. Although plaintiffs originally sought recovery only against the
owner-driver of the vehicle, the complaint was later amended to include Subaru
of America. The owner-driver of the vehicle was dismissed upon executing a
settlement and/or a loan-receipt agreement with each plaintiff.

At trial, plaintiffs Thomas and Edward Moore claimed a defective rear seat belt
design and defective seating system rendered Thomas Moore a quadriplegic
and caused serious injury to Edward Moore. The trial was bifurcated and the
jury found for plaintiffs on the issue of liability. On April 8, 1987, the jury
rendered its verdict on the issue of damages in favor of Thomas Moore in the
amount of $1.5 million and in favor of Edward Moore in the amount of
$40,000.00. Barbara Moore was not a party to the trial, having dismissed her
case with prejudice the day before trial.

On July 24, 1987, after entering judgment on the jury verdict, the trial court set
off the amounts received by plaintiffs' settlement with the owner-driver's
insurance carrier. Edward Moore received $125,000.00 from the owner-driver's
primary insurance carrier. Thomas Moore received $244,072.00 from the
primary insurance carrier and $2,000,000.00 from the excess carrier in the form
of a loan-receipt agreement. Finding that the purported loan-receipt agreement
was subject to set-off, the trial court reduced $2,000,000.00 from the jury
verdict for Thomas Moore and $125,000.00 from the jury verdict entered in
favor of Edward Moore. Further orders were entered by the trial court on
January 28, 1988, after timely Rule 59 motions by both parties. The trial court
ordered prejudgment interest on the jury verdict prior to set-off. The trial court
also ordered defendant to pay plaintiff's attorney fees and expenses as a
sanction for discovery disputes and costs. On February 22, 1988, the trial court
entered an Amended Judgment calculating prejudgment interest from the date
Subaru was joined and set off the additional amount of $244,072.00 which
Thomas Moore received from the primary insurer of the owner-driver.1 The
trial court found that plaintiff Thomas Moore should recover nothing because
the verdict in his favor was less than the set-off amount and he was not entitled
to post-judgment interest. The same was true for Edward Moore.

Plaintiff Thomas Moore appeals the trial court's set-off of the loan-receipt
agreement claiming that set-off is not allowed under Indiana law and that
Subaru waived the affirmative defense of set-off. Thomas Moore also alleges
that the damages awarded are inadequate as a matter of law. Plaintiffs Thomas
Moore and Edward Moore claim the trial court erred in not giving an
instruction on punitive damages and excluding evidence of implied admissions
of liability by misconduct on discovery. Defendant presents a protective crossappeal regarding the trial court's order and computation of pre-judgment
interest prior to set-off and the trial court's error in evidentiary rulings. Because
the relief defendant requests is dependent upon the outcome of plaintiffs'
appeal, we will first address the three basic issues presented by the appellants.

II. Standard of Review

The decisions by trial court judges which concern questions of fact are
reviewed under the "clearly erroneous" standard. A finding of fact is "clearly
erroneous" if the appellate court, after reviewing the record, finds no factual
support for the decision. LeMaire v. United States, 826 F.2d 949, 953 (10th
Cir.1987); Cowles v. Dow Keith Oil & Gas, Inc., 752 F.2d 508, 511 (10th
Cir.1985), cert. denied, 479 U.S. 816, 107 S.Ct. 74, 93 L.Ed.2d 30 (1986).
When there are two permissible views of the evidence, the factfinder's choice
will not be reversed as clearly erroneous. Anderson v. Bessemer City, 470 U.S.
564, 573-74, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985); see Lone Star Steel
Co. v. United Mine Workers, 851 F.2d 1239, 1242 (10th Cir.1988).

Under the Tenth Circuit Rules of Court, Rule 28.2(d),2 each party has a duty to
state, in their initial briefs, where in the record each issue was raised and ruled
upon. Rule 28.2(e) states:

Whenever an appeal is based upon a failure to admit or exclude evidence, or the

giving or refusal to give a particular jury instruction, or any other act or ruling
for which a party must record an objection to preserve the right to appeal, the
party shall state where in the record a proper objection was made to the ruling
and whether the objection is recorded and ruled upon.

The appellants here have failed to reflect where in the record the majority of
issues contained in their briefs were raised, ruled upon, and objections made.
Furthermore, the appellants have failed to designate many parts of the record
which they make general reference to in their briefs. Without the record before
us to substantiate the general allegations of error, we must defer to the trial
court's decisions in these areas.

III. Set-Off of Loan-Receipt Agreement

10

In order to determine if set-off was proper, we must first resolve the issue of
whether Indiana or Oklahoma law applies to the loan-receipt agreement. The
agreement states that Indiana law governs its terms. However, Oklahoma is the
forum state for this litigation.

11

In actions where jurisdiction is based on diversity of citizenship, the substantive

law, including the choice of law rules, of the forum state is applied. Pound v.
Insurance Co. of North America, 439 F.2d 1059, 1062 (10th Cir.1971);
Hackbart v. Cincinnati Bengals, Inc., 601 F.2d 516, 522-23 (10th Cir.), cert.
denied, 444 U.S. 931, 100 S.Ct. 275, 62 L.Ed.2d 188 (1979). Although the
language of the loan-receipt agreement states that Indiana law governs the

terms of the agreement, Indiana appears to be one of the few jurisdictions

which recognizes these agreements as valid contracts which can circumvent setoff. American Transport Co. v. Central Indiana Railway Co., 255 Ind. 319, 264
N.E.2d 64 (1970). We hold that the trial court correctly found under conflict of
law principles that Oklahoma law applies to the facts of this case.
12

The trial court found that Oklahoma law applied to the loan-receipt agreement
under principles of either tort or contract law. When evaluating the facts of this
case as a tort question, the Oklahoma choice of law rule requires application of
the law of the state with the most significant relationship to the parties. White v.
White, 618 P.2d 921, 924 (Okla.1980); Brickner v. Gooden, 525 P.2d 632, 637
(Okla.1974). The trial court concluded that "the state with the most significant
relationship to the accident is Oklahoma." Order, July 24, 1987, at 5. We agree.

13

Even if the loan-receipt agreement issue is classified as contract, Oklahoma law

applies. The Oklahoma choice of law rules for contracts require the forum court
to apply the law of the state (1) chosen by the parties, Pate v. MFA Mutual Ins.
Co., 649 P.2d 809, 811 (Okla.App.1982); (2) where the contract was made or
entered into, Telex Corp. v. Hamilton, 576 P.2d 767, 768 (Okla.1978); or (3)
the place of performance if indicated in the contract, Rhody v. State Farm Mut.
Ins. Co., 771 F.2d 1416 (10th Cir.1985). The plaintiff and owner-driver chose
the law of Indiana to apply to their agreement, and the loan was to be repaid
(performed) in Indiana. The loan was entered into by Thomas Moore in
Pennsylvania. Thus, under normal circumstances, a forum court applying
Oklahoma choice of law rules for contracts would probably apply Indiana or
perhaps Pennsylvania law, but under these three tests the forum court would not
apply Oklahoma law.

14

However, two additional considerations require the application of Oklahoma

law to the set-off issue under the facts of this case. These two considerations
stem directly from the reasoning of Pate v. MFA Mutual Insurance Co., 649
P.2d 809 (Okla.App.1982). In Pate, the defendant insurance company sought to
enforce a contract provision requiring credit for settlement with any other tortfeasor. This contract was entered into in Arkansas, and the policy was valid
under Arkansas law. The Pate court, however, concluded that although
normally the law of the state where the contract was entered into applied, in this
case it would not apply Arkansas law because Arkansas law was contrary to the
law and public policy of Oklahoma, the state of enforcement. Id. at 811. The
Pate court pointed to a specific Oklahoma statute which made invalid any
insurance provisions which attempted the very kind of credit attempted by
Pate's insurer. The Pate court also cited the comments to the Restatement
(Second) of Conflict of Laws 6 (1971) which state that "the court will apply a

local statute in the manner intended by the legislature even when the local law
of another state would be applicable under usual conflict-of-law principles." Id.
at 812. This principle, adopted in Pate, is directly applicable to the present case.
Oklahoma law requires set-off of any type of settlement and discharges the
defendant from contribution to any other tort-feasor. Applying contrary Indiana
law would not fulfill the intentions of the Oklahoma legislature in passing this
statute.
15

The second reason for applying Oklahoma law stems from the Pate court's
adoption of the Restatement (Second) of Conflict of Laws. Section 187(2)(b) of
the Restatement requires the application of the law of the state with a materially
greater interest in the determination of the issue if the application of the law of
the state chosen by the parties would be contrary to the first state's fundamental
policy.3 The trial court found that "Oklahoma law applies because it has a
materially greater interest in the validity of the loan-receipt agreement." Order,
July 24, 1987, at 7. Given the facts of this case, to hold otherwise would allow
parties to circumvent forum state policy by selecting a state's law which is more
favorable to the particular parties' position.

16

The issue of whether the loan-receipt agreement should be set off against the
jury verdict is governed by Okla.Stat. tit. 12, 832. Section 832(H) provides as
follows:

17 When a release, covenant not to sue or a similar agreement is given in good faith
H.
to one of two or more persons liable in tort for the same injury or the same wrongful
death:
18It does not discharge any of the other tort-feasors from liability for the injury or
1.
wrongful death unless its terms so provide; but it reduces the claim against others to
the extent of any amount stipulated by the release or the covenant, or in the amount
of the consideration paid for it, whichever is the greater; and
19It discharges the tort-feasor to whom it is given from all liability for contribution
2.
to any other tort-feasor.
20

Okla.Stat.Ann. tit. 12, 832 (West 1988) (emphasis added).

21

The trial court made the following findings regarding the loan-receipt
agreement between appellant Thomas Moore and the driver-owner's excess
insurance carrier:4

Paragraph 4 of the agreement states that Thomas Moore "agrees to obtain the
22

dismissal of his pending claim against David M. Diamond" and "covenants and
agrees that he will never bring or prosecute or allow to be brought or prosecuted in
his name or on his behalf any action, suit or proceeding of any kind or character
against David M. Diamond." Further, the agreement, in paragraphs 1 & 2, provides
that the loan is without interest and is "repayable only in the event and to the extent
of one-half ( 1/2) of any net recovery" by Moore from the manufacturers and
distributors of the station wagon and that Moore "agrees to institute and diligently
and vigorously prosecute an action against the manufacturers and distributors" as
security for the loan. The agreement, in paragraph 5, also provides that the "loan
need not be repaid if the action against Subaru is unsuccessful."
23

Order, July 24, 1987, at 2-3 (emphasis added).

24

We agree with the trial court that the purported loan-receipt agreement is not a
valid loan transaction under Oklahoma law. Whether or not this "loan-receipt
agreement" is a "release" or a "covenant not to sue," it is at least a "similar
agreement" which is subject to set-off under section 832(H). To hold otherwise
would result in circumvention of the plain reading of the state policy as
mandated by Okla.Stat. tit. 12, 832. This conclusion is consistent with the
reasoning of Pate.

25

In addition to the fact that the Oklahoma statute's language regarding "similar
agreements" seems clearly to apply to this case, we note that judicial
interpretation of similar "settlement" agreements further support our
interpretation of this agreement. The loan-receipt agreement originated as a
device by which insurers loaned funds to insureds pending litigation against a
wrongdoer. See Luckenbach v. W.J. McCahan Sugar Refining Co., 248 U.S.
139, 39 S.Ct. 53, 63 L.Ed. 170 (1918). This type of agreement has been utilized
by potential joint tort-feasors, their liability insurers, and injured parties. These
agreements may be interpreted as valid loans, covenants not to sue, or releases,
depending on the terms of the agreement. The issue here is whether the
Oklahoma courts would treat the amount tendered as a valid loan, not subject to
set-off, or as an absolute payment in the course of a settlement agreement
which is subject to set-off.

26

The construction of a loan-receipt agreement involving co-tort-feasors and an

injured party has not been directly addressed by the Oklahoma Supreme Court.
Therefore, we look to analogous Oklahoma cases and the current status of the
law in other jurisdictions with similar statutes to guide us in determining how
Oklahoma courts would decide the issue of loan-receipt agreements. See Cleere
v. United Parcel Service, Inc., 669 P.2d 785, 788 (Okla.App.1983) ("where
Oklahoma has adopted uniform laws or laws from other jurisdictions, case law

from those jurisdictions interpreting such laws are persuasive authority in our
interpretation of such laws").
27

In Cox v. Kelsey-Hayes Co., 594 P.2d 354, 357 n. 3 (Okla.1978), the court
stated: "Mary Carter agreements are similar to 'loan-receipt agreements' and
'covenants not to execute.' " Cox was a manufacturer's products liability action
wherein the agreeing defendant remained a party to the action. Although Cox is
distinguished from the case at bar because the settling defendant here was
dismissed by plaintiffs, it is still relevant that the Oklahoma Supreme Court
likened loan-receipt agreements and covenants not to execute to each other.

28

In Braden v. Hendricks, 695 P.2d 1343, 1349 (Okla.1985), the court

emphasized that the common-law right of indemnity and rights of contribution
among joint tort-feasors were codified at Okla.Stat. tit. 12, 832 (1981).
Oklahoma prohibits a settling tort-feasor from recovering contribution from a
non-settling tort-feasor. Section 832(D) states:

29

A tort-feasor who enters into a settlement with a claimant is not entitled to

recover contribution from another tort-feasor whose liability for the injury or
wrongful death is not extinguished by the settlement nor in respect to any
amount paid in a settlement which is in excess of what was reasonable.

30

Okla.Stat.Ann. tit. 12, 832(D) (West 1988). In construing the present status of
Oklahoma law, it is clear that the courts and legislators have prescribed rules
which prevent a settling tort-feasor from realizing "windfall" profits to the
detriment of the other joint tort-feasor.

31

In Bolton v. Ziegler, 111 F.Supp. 516 (N.D.Iowa 1953), the court found that
construing an agreement as a loan transaction instead of a covenant not to sue
would result in the non-agreeing tort-feasor contributing to or indemnifying the
agreeing tort-feasor contrary to Iowa law. See also Cullen v. Atchison, Topeka
& Santa Fe R. Co., 211 Kan. 368, 507 P.2d 353 (Kan.1973). In Biven v.
Charlie's Hobby Shop, 500 S.W.2d 597, 599 (Ky.1973), the court denied the
effect of the loan-receipt agreement as a valid loan and held valid the terms of
the release given in consideration of absolute payment. In Alder v. Garcia, 324
F.2d 483 (10th Cir.1963), we denied the joint tort-feasor's insurer the ability to
recoup up to one-half of settlement between assignee-injured party and joint
tort-feasor. This court found such payment would benefit the settling joint tortfeasor in violation of New Mexico's Contribution Among Joint Tort-Feasors
Act. Id. at 485. The New Mexico Act, like Oklahoma, contained language
prohibiting a settling tort-feasor from recovering contributions from another

joint tort-feasor. Id. See also Okla.Stat. tit. 12, 832(D) (West 1988).
32

The appellant's argument that defendants waived the affirmative defense of setoff is without merit. An Oklahoma court has ruled that it is the duty of the trial
court judge to calculate settlement credit. See Cleere v. United Parcel Service,
Inc., 669 P.2d 785, 788 (Okla.App.1983). This court has previously relied upon
Oklahoma law in holding that the trial judge has the duty to deduct the amount
of a prior settlement from a jury's verdict. See Parker v. O'Rion Industries, Inc.,
769 F.2d 647, 650 (10th Cir.1985). Appellant cited no authority to support the
contention that set-off is an affirmative defense. We therefore affirm the trial
court's finding on the issue of set-off.

IV. Inadequate Damages

33

Appellant claims that the damages awarded are inadequate as a matter of law.
Absent an award so grossly inadequate as to raise an irresistible inference that
bias, prejudice, or passion invaded the trial or so as to shock the court's
conscience, a jury's determination of damages will be upheld. Bennett v.
Longacre, 774 F.2d 1024, 1028 (10th Cir.1985); Acree v. Minolta Corp., 748
F.2d 1382, 1388 (10th Cir.1984). Appellant claims there was uncontroverted
evidence at trial establishing past and future medical expenses totaling
$4,761,531.00. Appellant designated as part of the record a selection of four
pages from the trial transcript of the testimony of an expert witness. Although
these four pages do support the fact that there was testimony of past and future
medical expenses in the amount claimed by appellants, appellants do not
provide any evidence indicating passion or prejudice on the jury's part. See
Black v. Hieb's Enterprises, Inc., 805 F.2d 360, 362 (10th Cir.1986). We are
satisfied the trial court's analysis was substantially correct when it wrote:

34

Plaintiffs say that their uncontroverted evidence at trial established that Plaintiff
Thomas A. Moore's past and future medical expenses would total in excess of
$4,000,000. Thus, Plaintiffs infer that the damages verdict in the amount of
$1,500,000 in favor of Thomas A. Moore failed to take account of his pain and
suffering and was therefore inadequate as a matter of law. Defendant's counsel
cast doubt on Plaintiffs' expert's calculation of future medical expenses through
extensive cross-examination. And although Plaintiffs' evidence of Thomas A.
Moore's damages was not directly controverted, it is quite possible that the jury
did not find Plaintiffs' expert's testimony to be convincing. This was properly
within the jury's province. Moreover, in making the argument that the damages
awarded were inadequate in light of uncontroverted evidence that Plaintiff
Thomas A. Moore's medical expenses will total in excess of $4,000,000,
Plaintiffs ignore the jury's duty, under the instructions given, to discount to

present value any award for damages. Plaintiffs have not pointed to any
evidence indicating passion or prejudice on the jury's part. See Black v. Hieb's
Enterprises, Inc., 805 F.2d 360, 362 (10th Cir.1986). And the Court simply
cannot say that the damage award to Thomas A. Moore was so grossly
inadequate as to raise an irresistable [sic] inference that bias, prejudice or
passion invaded the trial, id., citing Bennett v. Longacre, 774 F.2d 1024, 1028
(10th Cir.1985), or so as to shock the Court's conscience. Id. See also Acree v.
Minolta Corp., 748 F.2d 1382, 1388 (10th Cir.1984).
35

Order, January 22, 1988, at 2-3.

36

On appeal plaintiffs point out that the allegedly uncontroverted expert

testimony as to future damages was already discounted to present value when
the $4,000,000 figure was calculated. However, plaintiffs fail to recognize that
it is the jury's duty to judge the credibility of a witness's testimony in light of
any doubts created by cross-examination. A battle between dueling experts is
not necessary if sufficient lack of reliability is shown during cross-examination
to justify a jury conclusion of smaller future damages. We refuse to alter a jury
verdict without further proof of jury passion or prejudice. Thus, we affirm the
trial court's ruling on adequacy of damages.

V. Punitive Damages
37

Appellant also claims that the trial court erred by failing to give a punitive
damages instruction to the jury. However, the appellant failed to follow Tenth
Circuit Rule of Court 28.2(e) which requires that it be stated where in the
record an objection was made and ruled on. Nevertheless, the trial court
appears to have addressed the issues of damages and adequacy of damages.
Therefore, we will also review the merits of this contention. Based on the
record before us, we are satisfied that the trial court's handling of this issue was
correct.

38

Punitive damages are proper against the manufacturer of a product when the
injury is attributable to conduct that reflects a reckless disregard for public
safety. See Thiry v. Armstrong World Indus., 661 P.2d 515, 518 (Okla.1983).
There must be sufficient evidence presented showing the manufacturer was
aware of or culpably indifferent to an unnecessary risk of injury before an
instruction to the jury on punitive damages is proper. Id. Evidence cited by
appellant in his brief supporting the claim for a punitive jury instruction does
not amount to sufficient evidence on which to predicate such an instruction.
Appellant does not prove that Subaru was aware of or culpably indifferent to
any safety risks created by its seat belts.

39

A lot of time and energy is spent on the argument that conduct during
acrimonious discovery is evidence which would support punitive damages. In
effect, appellant argues that obstructiveness in producing requested information
constitutes an implied admission of punitive guilt. We are simply not persuaded
by that argument in this case. The relevant evidence properly went to the jury
on the liability issue. The trial court properly found that the evidence did not
meet the threshold requirement for punitive damages. Again we adopt the trial
court's discussion of this issue:

40

With respect to Plaintiffs' contention that the Court erred in refusing to instruct
on the issue of punitive damages, the Court is satisfied that there was no
evidence of conduct on the part of Defendant Subaru of America which
reflected a reckless disregard for public safety, i.e. evidence that Subaru was
aware of or culpably indifferent to an unnecessary risk of injury from a lack of
crashworthiness of the 1982 Subaru GL Station Wagon. Thiry v. Armstrong
World Industries, 661 P.2d 515, 518 (1983). There was no evidence that
Defendant or its employees possessed information indicating that the wagon
posed an unnecessary risk of injury. There was no evidence of, for example,
complaints concerning seat belt accessibility or the type of "failure" of the front
seat claimed by Plaintiffs, or of suits in which such allegations were made.
Accordingly, refusal to submit the issue of punitive damages to the jury was
proper. Id.

41

After the Court denied Plaintiffs' motion seeking a default judgment as a

sanction for non-compliance with discovery requests and orders, Plaintiffs
sought to introduce evidence of what they contend were obstructionist tactics of
Defendant throughout discovery as a tacit admission of its liability. See
Plaintiffs' Supplemental Trial Brief. The Court refused admission of this
evidence. In their motion for a new trial on the issue of damages, Plaintiffs urge
specifically that Subaru's refusal to produce FMVSS test documents and design
and safety memoranda constituted an implied admission that their design and
manufacture was defective, and unreasonably dangerous, citing Norman v.
Young, 422 F.2d 470 (10th Cir.1970), State of Ohio v. Arthur Andersen & Co.,
570 F.2d 1370, 1374-75 (10th Cir.), cert. denied, 439 U.S. 833, 99 S.Ct. 114,
58 L.Ed.2d 129 (1978), and Texaco, Inc. v. Layton, 395 P.2d 393, 399
(Okla.1964).

42

Even if such evidence were properly admissible, its relevance is to the issue of
liability, not to damages. Plaintiff's motion for a new trial is for a new trial on
the issue of damages, only, which was bifurcated from trial on the issue of
liability. The evidence was properly excluded on grounds of relevance.

43

Order, January 22, 1988, at 3-5.

44

The appellant makes other general allegations in his brief as to how the trial
court erred. The fact remains that Tenth Circuit Rule of Court 28.2(e) was not
followed, and it is not stated where in the record an objection was made and
whether it was ruled on. Furthermore, the designated record does not support
the contentions that the trial court erred. Thus, we refuse to review these other
general claims of error.

VI. Cross-Appeal
45

We have reviewed the appellee's cross-appeal which is presented to us as a

protective appeal. Because we have not granted the relief the appellant
requested, there is no reason to address any of the issues raised on the crossappeal.

VII. Conclusion
46

The trial court was correct in setting off the amount received under the loanreceipt agreement from the jury verdict. Under the facts of this case,
recognizing this agreement as a valid loan would violate Oklahoma policy
which prohibits a settling tort-feasor from recovering contribution from another
tort-feasor whose liability is not extinguished by the settlement. The
interpretation of the language of this loan-receipt agreement includes a
"release," a "covenant not to sue," and a "similar agreement" which is subject to
set-off under Oklahoma law.

47

The very limited record designated by appellants does not support their
arguments concerning damages. We are persuaded that the trial court properly
resolved each of the issues on damages.

48

AFFIRMED.

Prejudgment interest for Thomas Moore was calculated to be $513,750.00 for a

total award of $2,013,750.00 less the total set-off of $2,224,072.00

The current local rules as amended were effective January 1, 1989. Although
the parties may have prepared their briefs prior to the effective date, the former
rules contained identical language. Current local rule 28.2(d) was formerly
Rule 28.2(e), and current local rule 28.2(e) was formerly 28.2(f)

187. Law of the State Chosen by the Parties

(1) The law of the state chosen by the parties to govern their contractual rights
and duties will be applied if the particular issue is one which the parties could
have resolved by an explicit provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights
and duties will be applied, even if the particular issue is one which the parties
could not have resolved by an explicit provision in their agreement directed to
that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties choice, or
(b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than the
chosen state in the determination of the particular issue and which, under the
rule of 188, would be the state of the applicable law in the absence of an
effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the
local law of the state of the chosen law.
Restatement (Second) Conflict of Laws 187 (1988) (emphasis added).

Because appellant failed to include the loan-receipt agreement as a part of the

designated record, or any portions of the trial transcript making reference to the
terms of the agreement, we are bound by the trial court's findings